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Recommendations for Chipotle Mexican Grill Inc.
- 1. Recommendations for Chipotle Mexican Grill Inc. Stars Consulting Group – Regina Ip
- 2. Overview 2
- 3. 3 Company Issues – Competitions Cantina Bell Menu Impact on Chipotle: Loss on revenue and price-conscious customers Background | Analysis | Recommendations | Implementations
- 4. 4 Background | Analysis | Recommendations | Implementations Analysis: The Trend of Being Health Conscious
- 5. Background | Analysis | Recommendations | Implementations 5 Analysis: Fast Casual vs. Full Service Restaurant Fast Casual Full service
- 6. 6 Background | Analysis | Recommendations | Implementations Recommendations ▪ Reposition themselves to the “full-service restaurant” segment
- 7. 7 Background | Analysis | Recommendations | Implementations Recommendations: Reduce the pace of expansion Chipotle opens approximately 50-60 new restaurants every quarter. For 2016, management expects to open 220-235 new restaurants. If continue to expand Possible Consequences Deepening difficulty to maintain cash flow Profit continues to decrease More severe net loss
- 8. Implementations: Three Phases Phase 1 Introduce Chipotle Mexican Grill full-service restaurants at selected locations in urban areas Phase 2 Introduce to smaller cities and international markets Phase 3 Continue Chipotle’s expansion gradually with careful selection of locations Background | Analysis | Recommendations | Implementations 8 • Preferably 2,200 square feet or more • An initial investment will be required • Should take approximately 6 years • Should take approximately 3 years
- 9. Recap 9
- 10. Q&A 10
- 11. References Alverez, A. (2016, May). Full-Service Restaurants in Canada. Retrieved from http://clients1.ibisworld.com.proxy.lib.sfu.ca/reports/ca/industry/default.aspx?entid=1677 Chipotle. (2016, April 26). Press Release. Retrieved from http://ir.chipotle.com/phoenix.zhtml?c=194775&p=irol-newsArticle&ID=2161714 Levine-Weinbery, A. (2015, October 25). Chipotle Mexican Grill, Inc. Is Taking a New Route to Revenue Growth. Retrieved from http://www.fool.com/investing/general/2015/10/25/chipotle-mexican-grill-inc-is-taking-a- new- route-t.aspx Nielsen. (2015, February 4). Younger Consumers Endorse Healthy Foods with a Willingness to Pay a Premium. Retrieved from http://www.nielsen.com/us/en/insights/news/2015/younger-consumers-endorse-healthy- foods- with-a-willingness-to-pay.html Wikipedia (2016, May 26). Chipotle Mexican Grill. Retrieved from https://en.wikipedia.org/wiki/Chipotle_Mexican_Grill#International_expansion
- 12. Appendix 10 Largest Cities in the United States 2 Cities in Canada ▪ Toronto, ON ▪ Vancouver, BC 12
- 13. Background | Analysis | Recommendations | Implementations 13 Appendix: Fast Casual vs. Full Service Restaurant in US Fast Casual Full service
Notes de l'éditeur
- Chipotle is doing the right thing, because there is the trend of being health conscious. Therefore can remain the high price menu as long as the ingredients maintain sustainable and health.
- Based on IBIS World 2016 Industry Report for Canada, 44.1% of fast causal restaurants are on-premise limited service, which is the category where Chipotle is in. As for the full service restaurant industry, there are only 2.6% that are Mexican restaurants. From this, we can confirm that there will be less competitions in the full service restaurant industry. While consumer spending on both segments are similar, industry revenue will continue to grow, while fast casual segments revenue will gradually decrease.
- Benefits Fewer number of direct competitors (no more Taco Bell) Customer perceived value increases Sufficient input (money, employees, food) Considerations There will be a one time cost at the inception of the change (staff training, computer systems, suppliers, store design, etc.) Although barrier to enter is low and are steady, as the concentration is low, barrier to success is higher compared to other industries. However, given that the concentration of Mexican restaurants is the lowest of all and Chipotle has 23 years of experience, the likelihood to success increases. As being a full-service restaurant, there is a lack of varieties in chipotle’s current menu items.
- Every restaurants that they opened, there would be a fixed costs associating with them. According to the First Quarter 2016 Results, there is a net loss of $26.3 million and operating margin decreases from 27.5% to 6.8%. If Chipotle continues to expand rapidly, this might lead to a deepening difficulty to obtain th Although this is one of chipotle’s business strategy to increase restaurant sales, during this economic difficult times, instead of expanding, it is better to focus on each restaurant’s revenue by updating its interior design and reposition themselves in the “full service restaurant segment”